Ageing, Cognitive Abilities and Retirement
Einaudi Institute for Economic and Finance (EIEF) Working Paper No. 1015
37 Pages Posted: 14 Feb 2012
Date Written: January 12, 2010
We investigate the relationship between ageing, cognitive abilities and retirement using the Survey on Health, Ageing and Retirement in Europe (SHARE), a household panel that offers the possibility of comparing several European countries using nationally representative samples of the population aged 50. The human capital framework suggests that retirement may cause an increase in cognitive decline, since after retirement individuals lose the market incentive to invest in cognitive repair activities. Our empirical results, based on an instrumental variable strategy to deal with the potential endogeneity of retirement, confirm this key prediction. They also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities.
Keywords: ageing, cognitive abilities, retirement, education, SHARE
JEL Classification: J14, J24
Suggested Citation: Suggested Citation